The Law Society is to lose its role in regulating solicitors doing investment business.
But fears that solicitors would have to hive off their investment practices have been allayed.
The financial regulator formerly known as Newro – now officially named the Financial Services Authority (FSA) – last week issued a consultation paper which declared, as predicted by The Lawyer last May, that Treasury ministers were intending to put the Law Society's authorisation and rule-making powers into the hands of the FSA.
But it also said that ministers were considering allowing professional bodies like the Law Society to continue to carry out specialised functions, like monitoring, on behalf of the FSA.
There were two other crumbs of comfort for the Law Society and solicitors doing investment business.
The paper said that ministers were considering preventing the FSA from making new rules in areas where the Law Society's existing rules concerning investment business were already adequate.
Also, around 3,000 law firms may no longer have to pay an annual fee of £210 per firm, plus £70 per partner, to be authorised as carrying on investment business. Because of a vague definition of investment business in the Financial Services Act, many law firms pay to be authorised “just in case”, even though the investment work they do is incidental to their normal work.
The paper states that the Treasury is looking to see whether the Act can be amended “in order to remove any requirement for unnecessary authorisation”.
Alison Crawley, the Law Society's head of professional ethics, said: “We are trying to see the good news in it, but we have lost that area of solicitor regulation.” She said it was now a question of negotiating contracts with the FSA to do monitoring for them and perhaps putting in a bid to do the complaints handling, “although I doubt they'll let us do that because they want their one-door policy”.
Heather Martin, secretary of the Association of Solicitor Investment Managers, said it had feared that law firms would have to hive off their investment business into separate companies to avoid falling under two sets of mutually incompatible rules.
Solicitors' accounts rules, for example, might have clashed with any rules the FSA produced. Martin said: “It looks as if we might avoid that, although there is a lot of work still to be done on the rule surrounding compensation.”